With the UK population ageing, deciding upon a satisfactory and sustainable system for the funding of people’s long-term care (LTC) needs has long been a topic of political debate. Phase 1 of the Care Act 2014 (“the Act”) brought in some of the reforms recommended by the Dilnot Commission in 2011. However, the Government announced during 2015 that Phase 2 of “the Act” such as the introduction of a £72,000 cap on Local Authority care costs and a change in the means testing thresholds1 would be deferred until 2020. In addition to this delay, the “freedom and choice” agenda for pensions has come into force. It is therefore timely that the potential market responses to help people pay for their care within the new pensions environment should be considered. In this paper, we analyse whether the proposed reforms meet the policy intention of protecting people from catastrophic care costs, whilst facilitating individual understanding of their potential care funding requirements. In particular, we review a number of financial products and ascertain the extent to which such products might help individuals to fund the LTC costs for which they would be responsible for meeting. We also produce case studies to demonstrate the complexities of the care funding system. Finally, we review the potential impact on incentives for individuals to save for care costs under the proposed new means testing thresholds and compare these with the current thresholds. We conclude that:

• ∙ Although it is still too early to understand exactly how individuals will respond to the pensions freedom and choice agenda, there are a number of financial products that might complement the new flexibilities and help people make provision for care costs.

• ∙ The new care funding system is complex making it difficult for people to understand their potential care costs.

• ∙ The current means testing system causes a disincentive to save. The new means testing thresholds provide a greater level of reward for savers than the existing thresholds and therefore may increase the level of saving for care; however, the new thresholds could still act as a barrier since disincentives still exist.

This abstract relates to the following paper: KennyT., BarnfieldJ., DalyL., DunnA., PasseyD., RickayzenB. and TeowA. The future of social care funding: who pays? British Actuarial Journal. doi: 10.1017/S135732171600012X

This paper seeks to establish good practice in setting inputs for operational risk models for banks, insurers and other financial service firms. It reviews Basel, Solvency II and other regulatory requirements as well as publicly available literature on operational risk modelling. It recommends a combination of historic loss data and scenario analysis for modelling of individual risks, setting out issues with these data, and outlining good practice for loss data collection and scenario analysis. It recommends the use of expert judgement for setting correlations, and addresses information requirements for risk mitigation allowances and capital allocation, before briefly covering Bayesian network methods for modelling operational risks.

This abstract relates to the following paper: KelliherP. O. J, AcharyyaM., CouperA., GrantK., MaguireE., NicholasP., SmeraldC., StevensonD., ThirlwellJ. & CantleN.British Actuarial Journal. doi: 10.1017/S1357321716000210

Recent changes made to the UK Corporate Governance Code require UK firms to report new or enhanced narrative information concerning their principal risks, their risk management processes and their future viability. This paper analyses whether the level and nature of voluntary compliance with these new requirements is consistent with alternative economic and political visibility incentives. We analyse relevant sections of financial reports produced by industry-matched samples of large-, mid- and small-cap UK-listed firms during the transitional 2013–2014 financial reporting years. Both specific and generic readability attributes of the reports are measured. We find that virtually no firm in our sample has provided any viability statement. Empirical analysis of disclosures concerning principal risk assessment and review processes appear to be primarily motivated by political visibility reasons. Examples of particularly good and cases of poor corporate risk reporting practices are also discussed. Possible implications for the actuarial profession are discussed.

This abstract relates to the following paper: KlumpesP., LedlieC., FaheyF., KakarG. and StylesS. Incentives facing UK-listed companies to comply with the risk reporting provisions of the UK corporate governance code. British Actuarial Journal. doi: 10.1017/5135732/716000180

The move from defined benefit to defined contribution (DC) has transferred the longevity and investment risks from the plan sponsor to the individual plan member. Without the actuarial cross-subsidies implied by pooling these risks, the danger of outliving one’s savings is significant. Much attention has been focussed on pre-retirement investment design but less on post-retirement. In most countries, the post-retirement systems in place are insufficient to solve this challenge for small asset sizes or small proportions of individuals’ retirement accounts. However, a number of DC markets are mature, such as Australia and Chile, and the principles of a solution that works for all must be identified. This paper researches a number of post-retirement systems around the world and identifies ten key factors that contribute to post-retirement solution design. These factors can result in an inconsistency between countries regarding the most appropriate post-retirement solution. Additionally, a disconnect is apparent between what retirees need and want in post-retirement. Successful post-retirement solutions will inevitably blend investment and insurance components in a balanced manner. With lengthening life expectancies, research supports strategies that blend a growth and income account-based approach for the first 15–20 years after retirement with longevity protection in later life.

This abstract relates to the following paper: MorganL-A. and LothianS.A. Designing successful post-retirement solutions by blending growth, income and protection. British Actuarial Journal, doi: 10.1017/S1357321717000034